The stock market is a place where the shares of publicly held companies are traded through:
1. Exchanges
2. Over-the-counter markets
The stock market is also referred to as the equity market. The existence of a stock market is vital as it allows companies access to money or capital against the shares that investors buy. The main aim of stock markets is to link and facilitate exchange of securities to reduce the risk of investing. The exchange of securities takes place among buyers and sellers of the shares. The market where the securities are created through the IPO is referred to as the Primary market.
On the other hand the market where previously issued securities are traded is referred to as the secondary market. It must be remembered that shares are intangible assets. It is through these shares that the entitled bearer receives a dividend at the end of every year. This dividend is paid by the company to the investor out of their distributable profits. The share price of a company at any given time is influenced by supply and demand. If the demand of a respective share is high, its price will go up. However, the share price will fall if lesser number of stock market investors are buying shares from the same company.
When dealing in stock markets it is important to remember that investors who wish to invest in a particular company must be aware of the company's business. They can either invest time in collecting information about the firm they wish to invest in or opt to obtain the same information from financial advisors. From an investor point of view the shares are considered to be the ownership unit of a company. Prior to making an investment in shares or stocks, it is important to consider factors like:
1. Safety - that takes into consideration risks evaluation
2. Liquidity - which involves how easily can investors get money out of a respective investment
3. Return on investment - evaluates the earning potential for investors
Another thing investors should be aware of is the type of stocks available. These include:
1. Common stock - this type of stock is held by the public and includes voting rights and dividends share
2. Preferred stock - on the other hand, has lesser rights than common stocks but results in consistent dividends
In order to evaluate how a stock is performing in comparison to other similar ones, investors break the market down into sectors according to company business.
1. Exchanges
2. Over-the-counter markets
The stock market is also referred to as the equity market. The existence of a stock market is vital as it allows companies access to money or capital against the shares that investors buy. The main aim of stock markets is to link and facilitate exchange of securities to reduce the risk of investing. The exchange of securities takes place among buyers and sellers of the shares. The market where the securities are created through the IPO is referred to as the Primary market.
On the other hand the market where previously issued securities are traded is referred to as the secondary market. It must be remembered that shares are intangible assets. It is through these shares that the entitled bearer receives a dividend at the end of every year. This dividend is paid by the company to the investor out of their distributable profits. The share price of a company at any given time is influenced by supply and demand. If the demand of a respective share is high, its price will go up. However, the share price will fall if lesser number of stock market investors are buying shares from the same company.
When dealing in stock markets it is important to remember that investors who wish to invest in a particular company must be aware of the company's business. They can either invest time in collecting information about the firm they wish to invest in or opt to obtain the same information from financial advisors. From an investor point of view the shares are considered to be the ownership unit of a company. Prior to making an investment in shares or stocks, it is important to consider factors like:
1. Safety - that takes into consideration risks evaluation
2. Liquidity - which involves how easily can investors get money out of a respective investment
3. Return on investment - evaluates the earning potential for investors
Another thing investors should be aware of is the type of stocks available. These include:
1. Common stock - this type of stock is held by the public and includes voting rights and dividends share
2. Preferred stock - on the other hand, has lesser rights than common stocks but results in consistent dividends
In order to evaluate how a stock is performing in comparison to other similar ones, investors break the market down into sectors according to company business.
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